At Davos, a Tale of Two Chinas

Donald Trump and Xi Jinping were no-shows at this week’s World Economic Forum in Davos. Even so, strained relations between their nations dominated discussion at the alpine talkfest. Speeches by Chinese Vice President Wang Qishan and financier George Soros sketched starkly different visions of China’s future.

Wang’s main mission was to reassure the West that China’s economy is on track. “There will be a lot of uncertainties in 2019, but something that is certain is that China’s growth will continue and will be sustainable,” he declared. Earlier in the week, China gave global investors a scare by announcing that its economy grew by 6.6% in 2018, China’s slowest rate of expansion in three decades. Wang insisted 6.6% growth should be considered a “pretty significant number.”

Wang also portrayed China as a staunch defender of free trade and open markets and made several thinly veiled digs at Trump for his “America First” economic agenda. “We reject the policies of the strong bullying the weak and self-claimed supremacy,” he said.

Soros repudiated Wang’s characterization of China as a benign global citizen in a lengthy critique at a private dinner Thursday. “China isn’t the only authoritarian regime in the world, but it’s undoubtedly the wealthiest, strongest and most developed in machine learning and artificial intelligence,” he warned. “This makes Xi Jinping the most dangerous opponent of those who believe in the concept of open society.”

Soros warned of China’s rapid advances in data collection and artificial intelligence, and decried the state’s attempts to create a social credit rating system that would enable China’s leaders to “subordinate the fate of the individual to the interests of the one-party state in ways unprecedented in history.” Soros also criticized Xi’s signature “Belt and Road Initiative,” meant to expand land and sea links between China, Europe and the Middle East, as “designed to promote the interests of China, not the interests of the recipient countries.”

Soros has long been a favorite bogeyman of American conservatives, who claim he has used his vast wealth to subvert Republican causes. And yet the Hungarian-born billionaire’s comments at Davos put him in remarkable alignment with Trump on China. At Davos, Soros praised vice president Mike Pence’s hawkish October China address as a “seminal speech,” and hailed efforts of Matt Pottinger, Asian affairs advisor for Trump’s National Security Council and an advocate of tougher U.S. policies towards China.

Soros’s remarks drew a swift rebuke from China’s foreign ministry. “We hope the relevant American can correct his attitude, not be shortsighted, and hold an objective, rational and correct opinion of China’s development,” said spokeswoman Hua Chenying.

Innovation and Tech

Game on. China granted permission for 95 new game releases on Thursday, the fourth batch of approvals since an 8-month hiatus on game licenses ended in December. The latest round of approvals was the first to include titles from Tencent. Company shares jumped 3% on the news Friday. Tencent, which earns two thirds of revenue from gaming, was hit hard by the freeze on approvals. The company even restructured its organization last October to reduce its reliance on games. Reuters

Vigilante debt collectors. A court in Hebei province released an app through WeChat’s “mini program” function that allows users to see if anyone nearby has outstanding debt. The app, called Deadbeat Debtors Map, shows the location of anyone within 500 meters with known outstanding debt. Users are encouraged to report any debtors who appear capable of making repayments. It’s the latest in China’s quest to implement “social credit scores,” which penalize citizens who violate China’s social mores. China Daily

Huawei or the highway. In a letter to employees, Huawei founder and CEO Ren Zhengfei warned that “mediocre” staff faced layoffs, as the company hunkers down for a fight. Ren said Huawei employs 180,000 staff and annual labor costs exceed $30 billion. Separately, in his first televised interview, Ren told China’s state broadcaster CCTV that the company’s management structure will be streamlined too. Nikkei Asian Review

Gene genie. China promised to punish He Jiankui, the scientist who last year created the world’s first genetically engineered babies. Authorities also confirmed that a second woman, whom He convinced to participate in the experiment, is still carrying a gene-edited fetus. Meanwhile, Chinese scientists produced five clones of a monkey after using gene editing to induce mental illness in the macaques. South China Morning Post

Flight or fight. DJI, the world’s largest drone maker, discovered at least 45 staff members had conducted fraud that could cost the company $150 million. Some employees inflated the cost prices of parts and pocketed the difference, and some colluded with researchers to provide favors to preferred suppliers. DJI suspects over 100 employees, out of a total 14,000, could be implicated as an investigation continues. Bloomberg

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Economy and Trade

Manage the menagerie. Xi Jinping summoned Party officials to a meeting on risk control Monday, where he warned them to be on the lookout for “black swans” and “grey rhinos.” The meeting came days after China announced its slowest annual growth rate in nearly thirty years, with GDP increasing 6.6% in 2018. Xi warned that “unpredictable international events” and a “sensitive external environment” posed a risk to China’s stability. South China Morning Post

A warm forecast from Davos. Vice President Wang Qishan addressed the World Economic Forum in Davos on Wednesday, offering an optimistic outlook on China’s future. “Despite all sorts of risks, challenges and difficulties, there is no question that we will achieve the target of building China into a moderately prosperous society by 2020,” he said. That target includes eradicating poverty and doubling 2010’s per capita GDP to $10,000. Caixin Global

Look, who’s talking? China’s vice premier and economy tsar Liu He is set to arrive in Washington next week to lead negotiations on trade. This week the White House reportedly cancelled meetings with a lower-level Chinese trade delegation to express dissatisfaction with Beijing’s failure to curtail “forced” technology transfers. Economic advisor Larry Kudlow has denied that any meetings were cancelled, or were even due to take place. Financial Times

Politics and Policy

Infantry get the boot. China’s military has reduced the size of its land force by half while boosting numbers in its air force and navy since major military reforms began in 2015. With two-million active personnel, the People’s Liberation Army is still the world’s largest armed force. The navy, air force, rocket force and strategic support force, which is responsible for cyber warfare, now constitute over 50% of the PLA’s total force. An analyst says the overhaul is designed to create a modern military more capable of exerting influence overseas. South China Morning Post